We use cookies to customise content for your subscription and for analytics.If you continue to browse Lexology, we will assume that you are happy to receive all our cookies. For further information please read our Cookie Policy.

Ensuring the practical workability of competition laws

At the Competition Policy Review (CPR) International Conference in Canberra on 23 October, partner Paul Schoff took part in a panel on Competition Laws and Regulatory Institutions. His discussion covered three key points on the practical implications of competition laws, summarised below.

Up front guidance for common business conduct

It is important to look at the Panel's law proposals from a truly practical perspective. We need to assess how well the law will permit workable up front guidance for common business conduct in realistic cost and time frames. In house counsel and antitrust lawyers aren’t always, or even usually, fighting cases about high principle with detailed affidavits and expert opinions, but are often applying a rougher analysis based on loose facts and rough economics.

In-house and antitrust counsel stop or modify far more potentially anticompetitive conduct than is often credited. Accordingly, the practical workability of a competition law is a matter of immediate and everyday concern.

From that perspective, the Panel is right to clearly articulate in the Draft Report the fundamental principle that the law should be simple, predictable and reliable. Otherwise it creates business uncertainty and imposes costs on the economy.

Passing the practical workability test

Second, many of the Panel's law recommendations pass the practical workability test and will be an improvement. Recommendations to make third line forcing subject to a competition test, to remove complex price signalling rules and to simplify cartel laws will all be improvements.

Particularly important is the proposal for cartel laws to apply only to actual competitors, not those who might conceivably be competitors (as per Norcast v Bradken.) That proposal avoids overreach. More generally, cartel law simplification avoids incoherence.

Failing the practical workability test

Lastly, some of the Panel's law recommendations don't pass that practical workability test. The recommendations for the proposed misuse of market power defence and the preservation of resale price maintenance (RPM) as a per se offence both fall short of the practical goal of permitting workable up front guidance.

The proposed defence to prosecution under s46 requires an assessment whether a particular type of conduct is likely to benefit the long-term interests of consumers. This criterion isn’t really capable of practically workable up-front application, at least not without excessive time, cost and uncertainty. How can such an assessment be made in advance with any real confidence? I think it will be practically impossible to advise that the defence is available, and if it isn’t available then I foresee a real risk of over capture from the newly formulated s46 prohibition.

On resale price maintenance, the Draft Report noted two important things. First it says: 'Like many forms of vertical trading restrictions, in many circumstances RPM may have little effect on competition in a market'. Further, it says: '... in a competitive market RPM may be beneficial to competition and consumers.'

It is a bit surprising in those circumstances that the Panel recommends preserving the RPM prohibition as a per se offence, albeit with easy notification such as for third line forcing at present. For better or worse easy notification may encourage a formalisation or 'hardening' of supplier RPM policies.